Hi-Fi Ltd. has defaulted in repaying security deposits received from its dealers. Such security deposits were accepted from the dealers for proper and timely performance of the contracts by them. Hi-Fi Ltd. wants to inve

As per section 186(8) of the Companies Act, 2013, a company which is in default in repayment of public deposits and/or interest thereon is not permitted to make or give any loan or investment or to provide any guarantee or security till the default is subsisting. But it is to be noted that in the given question, company has defaulted in repaying security deposit received from its dealers which were received for performance of contract of supply of goods or provisions of services. Such security deposits accepted for performance of contracts for supply of goods or provision of services are not considered as deposits within meaning of Rule 2(1)(c) of the Companies (Acceptance of Deposits) Rules, 2014. Therefore, the provisions of section 186(8) are not attracted. Hi-Fi Ltd. can make investment into equity shares of Wi-Fi Ltd. subject to fulfillment of other provisions of the Companies Act, 2013.